Trudeau canceled the joint media availability in beijing with each leader making a brief statement and taking no questions. U. K. Prime minister theresa may says she is confident of a positive outcome when she meets with eu officials this week. May spoke at a joint News Conference with Jeanclaude Juncker today. Clear, crucially, that we want to move forward together. On a couple of issues, some differences remain that require further negotiations and consultation. Continue, but we will reconvene before the end of the week and i am also confident that we will conclude this positively. May spend after they failed to reach an agreement to move the next stage of brexit negotiations. Whator Sticking Point is happens to the irish border when Northern Ireland leads the eu along with the u. K. Global news powered by more than 2700 journalists and analysts in over 100 countries 120 countries. Im Mark Crumpton. This is bloomberg. Julia live from bloombergs World Headquarters in new york, im julia chatterley. Scarlet im scarlet fu. Joe im joe weisenthal. Julia 30 minutes from the close of trading. Putting a damper on tax overhaul optimism. In tax the next step overhaul is reconciling the differences between the house and senate bills. Republican lawmakers will have to come to an agreement on everything from individual tax breaks to the timing of a Corporate Tax break cut. Vanguard is sounding the alarm on equity returns in 2018. The firm putting out the most cautious outlook in a decade. Vanguards chief economist joins us. And no deal on brexit. Theresa may forced to leave brussels and to handed over after troubles with the divorce talks within the eu. Vanguard market and economic report for 2018 is out and is the most guarded outlook in a decade. Questioning of volatility joe davis we just pointed out that you are the most cautious you have been in a long while. Explain why. Takes for having me. One is just the stellar performance weve had in the Capital Markets over the last seven years. The direction wasnt a surprise for us, but if anything, the magnitude has even exceeded some fundamentals. I think that in addition to the backdrop of intentionally slightly tighter Monetary Policy , it puts an end for valuation on economic fundamentals. Strategiesned shiny in these markets. It may have a very marginal benefit and it will be incremental to the more solid sort of returns. Getting back to basics. Lowering the cost of portfolio, perhaps lowering the spending returns. If you are an institution, the sky is not falling with respect to the Capital Market outlook. At the same time, we have realistic expectations of what this will generate from her return perspective over the next five years. Joe slightly more cautious stance. Investors avoid shiny objects. There are several free lunches, if i should use that term with respect to investors, that should certainly be harnessed. Alone, there. S. Has always been a case for compelling global diversification. Its Even Stronger today. A case will have highquality fixed income, nothing wrong with high yield or credit tilt in the portfolio. We are likely to be in store for some increases in equity market volatility. Investors could harness it as well. They have expected power, and its even higher than what we would of said two years ago. When you look at the most pronounced risk, it is that Global Labor Market that grows ever tighter. It results in a cyclical uptick in inflation. Isre is that most prominent . It the United States or elsewhere . The large economies in the world, they have a near low and very likely will have lower this year. I think it is natural, that Monetary Policy will become tighter. And we could even have higher. Be well. S. , it could below 4. It has been tough to see. Iascarlet the sky is falling joe the sky is falling, Financial Markets is anything in the risks in areas that make you think a gray bull market. It might really come to an end. A 10 rise in the equity market. A natural part of equity investors. We are in somewhat frothy territory. I would be concerned if we would have continued very strong upward price momentum in the equity market if they would not follow through by the earnings fundamentals. Some of which we have seen. Scarlet when you mention frothy territory. I tend to separate at times, expected growth rates relative to the investment. Between Economic Growth rates and a stock return. Ironically, it would be japan a fairly tepid economic landscape for a decade. Those investors wouldnt want to ignore those parts of the market in addition to areas of opportunity. Think the mindset is it should be Global Market capitalization. Overseasure to positions. The political headlines seem to escalate. Do you think the market becomes more sensitive to potential headlines whether it is the United States or beyond . The desensitized environment that operates . Volatility is at an alltime low. We see a we hone in little bit more positive surprises and parts of the developed market. And we should see a rise in financial volatility early because that will be testing the assumptions in the bond market, whether or not the Federal Reserve will only go twice in 2018. The political environment has surprised me that we have not seen a little bit more volatility in the Financial Markets. It is unlikely to persist for a continued basis. Finally, i want to ask you about rates because perennially, strategists think the rates bottom and then usually dont. The same story next year . Could we actually see the long and u. S. Rates changing the trajectory . Our longterm expectation for the 10 year treasury is a reasonable benchmark and has not changed for four or five years. They also a clearly above and more often below, about 2. 5 . To move thatressed given what we diagnose diagnosis really fundamental secular drivers of longterm interest rate. Feedback into real rate expectations. If we see 3 or 3. 5 yield on the 10 year treasury, it would come as a surprise to me because i think there are powerful forces that offset. We will seekely, flatter yield curves rather than an environment of markedly steeper ones. Scarlet joe davis, thank you for joining us. The 1 trillion and the republican tax plan. We will hear from Larry Summers on his concerns about running up the deficit. This is bloomberg. Scarlet what did you miss . Another weekend another showdown on capitol hill. Running out of money on midnight on friday. Treasury secretary Larry Summers and asked him whether they would prioritize defensive domestic spending. Look at what is happening in the middle east. Spending, growing. Inevitably, it will mean a reduction in hundreds of billions of dollars. And i think we need that spending for national security. Looking at the potholes on the roads that cost americans the equivalent of . 75 a gallon and gasoline taxes, looking the way in which funding for cancer chores has been cut. Bursting. Ce is i think the domestic spending and we need more military spending. , taking a large amount of Government Resources and allocating it to the top 1 of the population seems to me to be a rather perverse priority. If i could take just one more minute, heres what i think the viewers should think about. With the bulls simpson process, we brought a Bipartisan Group together and tried to get the countrys finances under long run control. Liberals. Not flaky the director of morgan stanley. Alan simpson was a prominent republican senator. They are anything but flaky Big Government liberals. And that ofsion their commission which included a number of republican congressman and senators was that what we needed to do is stabilize things with 21 of gdp in revenue and 21 of gdp in spending. For the foreseeable future. So the Revenue Target was 21 of gdp. Will leave us nearly 20 behind that target by setting a target of 4 to gdp less. Less 700 million a year than bowles and simpson effort atve partisan deficit reduction. You cannot save a great nation on a shoestring. That is unfortunately what this bill risks condemning us to try to do. That was former u. S. Treasury secretary Larry Summers speaking with david westin today. And now Bloomberg Business flash, a look at some of the biggest stories in the news right now. You ownership of the Oprah Winfrey network, dave aid for an additional 24. 5 stake. The move raises discovery ownership to over 70 . This is the first time winfrey has sold stock in the Network Since it began a decade ago. Winfrey will remain the chief executive officer. Buy at now for 57. 5 billion. It will have a hand in everything from insurance to the corner drugstore. Officer john row had this to say in a Bloomberg Radio interview. The loses are probably the competitors of cvs and aetna because if this is a durable and sustainable new approach, then these guys get the first mover affect. Julia the deal is among the biggest healthcare mergers in the past decade and is expected to close in the second half of 2018. That is your Bloomberg Business flash. Time for the stock of the hour and todays big winner is macys. On pace for the best day in almost a month. This comes with the stock up 60 . T Abigail Doolittle has been looking into this. Is this driven by the Holiday Shopping season and how it is better than it acted . Abigail lets take a look at the 50 climb because i havent seen a mainline stock climb and thats pretty extraordinary. Out forught macys was dead. It has a lot to do at the Holiday Season but truly has to do with november. Up other department stores, very strong and cooler weather. A lot of demand for outerwear. Plus, going into the black that strongay weekend shopping trend. They are setting up for a strong Fourth Quarter here. That is part of the enthusiasm on part of the investors. You are a chart expert and in any longterm define, you could have these bounces. Some are big. What would you look or to say this is the start of something durable . Love that question, joe, and it leads right to the hash to the chart i have here. These are the 2009 lows. We have seen the extraordinary climb higher. We see the upward trend starting to reverse and the sellers are starting to take control. And this bumpy ride down. What im looking at relative to it looks as though the buyers are going to be taking shares close to 30. If shares break definitively above 30, there might be reason to think that this is a holiday bump and maybe extends right to 2018. Extenti wonder to what this is fueled by discounts, offers, things that will ultimately impact margins. Abigail it is interesting but we dont have that information now. We have reports of strong credit card data and on traffic, mall traffic. Thatnt know about discounting influence. And it could weigh on the margins. Investors are so excited to see any signs of life around mace these. Cracks before you start doing good, you have to do less worse. Thank you so much. It cvs buying aetna for an astounding 69 billion, but will this change the Healthcare Industry forever . We will take a look at the charts next. From new york, this is bloomberg. Joe what did you miss . Here is a trump trade making a new high. After the election, the ratio of the dow jones versus the s p 500 index going back through various presidencies. You can see it is a republican presidency. When it is blue, a democratic residency. The dow seems to outperform during republican presidencies. It did well under bush, underperformed during obama, and since then, with the s p down in the dow up, outperforming in hitting new highs under the trump presidency. There are various explanations. The composition, the industrial focus. I think the dow is the more populist index. Its the one everybody quotes, the one trump would care about. Making new highs under his watch today. 24,000 sounds so much better than under 30,000. When you look at the Corporate News stories of the day, cvs you can at no for see a net trading below that price, reflecting skepticism the deal will those at the current price. It is combining a supplier and a distributor of Healthcare Services which is typically less contentious when it comes to regulatory approval. The department of justice has been fiddling around when it comes to that. Better. S will get take a look at this chart which shows the backdrop for that argument. Expenditures that go toward health care will be relatively flat under obama care. Still at near record highs. A big thanks to mike mckee for bringing this to my attention. This will help house everything under one roof. Administration, retail pharmacies, corner clinic. Julia the Chilling Effect we talked about when the investigation first began. Comparing the market cap of bitcoin to some u. S. Companies and the growth we have seen. If we talk about companies, why dont we talk about some countries as well . At up the value of bitcoin, coming to 190 billion. That is the yellow line. Market value of bitcoin is higher than the likes of romania, new zealand, iraq, and algeria. Joe it is higher, though. Julia and greece. Tough comparisons. I will report back in a couple of weeks time. We have been paring gains for the dow but still higher in the dow. Whatd you miss . Optimism surrounding tax cuts in the future. I am julia chatterley. I am scarlet fu. Joe i am joe weisenthal. Welcome to our closing bell coverage. Scarlet we begin with our market minute. It looked like it would be a bullish day for equities, and then we drifted lower. The dow finishing higher, up 57 points, well off its best levels of the session. The nasdaq has been dragged down by big cap tech names. Joe trump tweeted this morning that this could be a big day for the stock market, but predicting stocks is tough. Big day for the wrong reasons. Announced a has takeover. That will really phase a test when regulators take a look at it. As we know, the Trump Administration approach so far industry changing corporate takeovers has been a , judging byukewarm at t and time warner. In terms of other deals possible, 21st century fox and disney coming up once again. They are in discussions again according to people familiar with the matter. Talks with disney and comcast about combining certain media businesses everythings like foxnews and fox sports are off the table. Blue apron getting a big top, a by 17 after getting its first upgrade ever. Joe is chuckling. Still trades almost 70 its asking price from june. Joe lets take a look at the Government Bond markets, starting in the u. S. , rates higher and once again flattening. He yield up to 1. 81 2. 37 . Year moving up to one of the winners today, greece, fiveyear yield falling bailoutn news that transfers are being approved. We talk about greece much anymore because things are going pretty smoothly there. Nonetheless, positive news. No news is good news as far as greece is concerned. Sterling relinquishing gains, briefly plunging. It failed to produce a hopedfor agreement on brexit. We didnt see both sides striking an optimistic tone after we did see both sides striking an optimistic tone after the talks. That the talks ended before an agreement could be reached. Still high hopes. But as you can see, a bit of noise going on in sterling. Had some concerns over the weekend. On sunday, the president generating market jitters talking about those attempting to smuggle their wealth abroad. Qs all sorts of controls about concerns about capital controls attempting to lock down money escaping the country. Outflows flowing for the first time this year to 1. 8 billion dollars. Thats the lowest annual pace since 2010, just to give you a bit of perspective. I am showing you the move over the last two years, not that great, as you can see, in terms of currency strength. On commodity, lets start with the basics, oil and gold, both down today. Last week, opec news gave us some lift. Gold down modestly. Here is some good news for everyone. If we look at a oneyear chart of avocado prices they are a commodity. Down substantially in july. Remember the avocado panic. Millennials would never be able ofafford a home because spending all their money on avocado toast. Scarlet julia was really excited about the avocado chart. Action in the wake itprogress on the tax bill, started off everyone was celebrating, but the way the trading day progressed, stocks closed near their lows and dipped below 2. 3 7 at one point. Our bond vigilantes back . Critics in terms of the stock ket in terms of the stock market, after fridays crazy day, it was a disappointing sequel. To expectevery reason equities to trade well today. The dow went up today. But under the surface, it was a. Retty ugly day i. T. Stocks, particularly chips, have done horribly. A semiconductor is down 9 since thanksgiving. That hurts. You anticipated my question. A one day moves, you cannot read that much into it, but we are seeing a pattern, particularly on tech underperformance. A lot of companies are not in a orition to benefit from tax as much as other companies are. Therecertainly looks like is position shuffling going on. For the last five or six trading days, even on days when the s p 500 rallies, if you look at the correlation between the day we moved the stoxx versus your today performance, in many cases, it has been negative. For example, the top 10 stocks on the day would be all negative year to date and the bottom 10 would be up 60 or 70 . That does suggest that positions are being shuffled. We are probably going to some companies will benefit by being able to write off investment and these